Abstract
A household’s demand for a good or service expresses the quantities of that good or service that the household is willing and able to purchase as a function of a number of variables.
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Notes
- 1.
In the next section we will discuss restrictions on parameters of both supply and demand function.
- 2.
Expressing the household’s income annually immediately establishes the fact that quantity demanded is for one year period.
- 3.
L.R. Klein, “Macroeconomics and the Theory of Rational Behavior”, Econometrica, 14, 1946a. L.R. Klein, “Remarks on the Theory of Aggregation” Econometrica, 14, 1946b. H. Theil, Linear Aggregation of Economic Relations, North-Holland, Amsterdam, 1954.
- 4.
This is another nice trick to get rid of the aggregation problem altogether. The downside is, of course, an I-robot society!
- 5.
Taken from Ramu Ramanathan Introductory Econometrics with Application, 1992, second edition, the Dryden Press.
- 6.
In addition, for market equilibrium to be socially optimal, there should be no externalities.
- 7.
Paul Krugman, The Return of Depression Economics and the Crisis of 2008, p. 18.
- 8.
James Doti and Esmael Adibi, Econometric Analysis: An Applications Approach, Prentice-Hall 1988.
- 9.
As an analog of a household consumption function, \(C_0\) is sometimes interpreted as the subsistence level of consumption.
- 10.
Some writers express (4.22) as \(C = a\,{+}\,b Y\) and treat the autonomous consumption as a parameter. Given the volatility of autonomous consumption, due to wealth and other non-income effects, it should not be considered a parameter. After all, based on the definition, a parameter changes very slowly and incrementally.
- 11.
From Ramu Ramanathan Introductory Econometrics with Application pp. 544–547.
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Vali, S. (2014). Market Equilibrium Model. In: Principles of Mathematical Economics. Mathematics Textbooks for Science and Engineering, vol 3. Atlantis Press, Paris. https://doi.org/10.2991/978-94-6239-036-2_4
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DOI: https://doi.org/10.2991/978-94-6239-036-2_4
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